Bloomberg News

Esprit Sees First-Half Loss Amid Efforts to Rebuild Brand

December 19, 2012

Esprit Sees First-Half Loss Amid Efforts to Rebuild Its Brand

A sign advertises a sale at a Esprit Holdings Ltd. store front in Beijing, China. Esprit shares fell 1.4 percent to close at HK$11.68 in Hong Kong trading yesterday. Photographer: Sim Chi Yin/Bloomberg

Esprit Holdings Ltd. (330) said it may post a loss in the first half ending Dec. 31 as the apparel company struggles to revive its brand after missing earnings estimates for five straight years. The stock dropped.

The expected loss is “mainly attributable to worse-than- expected operating results” after its performance in the three months ended Sept. 30, Esprit said in a statement to the Hong Kong Stock Exchange yesterday. It didn’t provide details.

Esprit, which last month raised money from a rights offer, reiterated yesterday that it will continue efforts to “rebuild and revitalize” the brand, improve the quality of its products and improve efficiencies of its supply chain and distribution channels. The apparel brand has battled slower sales as customers have turned to rivals such as Inditex SA’s Zara.

Nomura Equity Research lowered its rating on the stock to “reduce” from “neutral” and cut the price target to HK$9 from HK$12.50. “The announcement has added further uncertainty to brand momentum and positioning, and creates more doubt around the Esprit story,” Tanuj Shori, a Hong Kong-based analyst at Nomura wrote in a note to clients.

Esprit shares fell 4.5 percent to HK$11.16 at the close of Hong Kong trading. The benchmark Hang Seng Index gained 0.6 percent.

Chief Executive Officer Jose Manuel Martinez Gutierrez took over in September after the previous CEO and chairman quit within twenty-four hours of each other earlier this year.

Martinez took the place vacated by Ronald Van der Vis, who announced his departure in June. Chairman Hans Joachim Koerber quit a day after Van der Vis. The departure of both executives had raised doubts over succession as Esprit struggles to restructure its business.

Michael Ying, the company’s former chairman, more than doubled his stake in the Hong Kong-based clothing retailer to 10.3 percent in November.

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editors responsible for this story: Stephanie Wong at swong139@bloomberg.net; Anjali Cordeiro at acordeiro2@bloomberg.net


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